Business Pulse

Nothing can prevent earthquakes or other natural disasters, but there are steps that can minimize their impact.

After last Sunday's 6.0 earthquake, the largest in the Bay Area in nearly 25 years, damages have been estimated as high as $4 billion. The San Francisco Business Times talked to Karen Goodfriend to find out what small business owners can do to prepare for disasters such as the Napa earthquake. Goodfriend, a principal at KK Wealth Advisors in Los Altos, has been a CPA for over 20 years and was named to Worth Magazine's list of best financial advisors five times.

Let's say I'm a small business owner. How should I feel about having a disaster plan?

First of all, it's very, very good business sense to do this. Some small businesses may be in an industry that's regulated and they're required to have a disaster plan, but many more are not. Having this earthquake is a really good reminder to put together a disaster preparedness plan. Hopefully it won't happen again, but at least it's a reminder.

So what's my first step?

Think in terms of having a written plan because that's going to create a template for having a clear plan. It's should be a team effort with either employees or service providers. Vendors would likely also be part of that plan. It should address questions like "If we're not able to operate within our facility, how might we be able to operate?"

What else should be a part of the plan?

Consider how you can continue to serve customers (under possible disaster circumstances). If you're a business that provides a continuing need, like a dry cleaner, it's good to continue operating as much as possible.

You should also be sure to involve IT team members in the plan, whether they're outsourced or in house. Make sure there's a discipline within your organization of backing up systems so that if the computers are destroyed, not all information is lost. Be sure to have access to customer contact lists, if that's important for your business, and vendors as well. There should be a whole process of how to communicate with employees, like having a chain of contact. If something happens, who's in charge, who's next in line, how will you contact everyone, etc.

What kind of financial considerations should I be thinking of?

Is there a way to be financing the business if the business does have some interruption? If there needs to be purchase of equipment, does one have access to a line of credit? How would the business be able to, on a short term basis, fund an extraordinary cost?

What about insurance?

When I work with clients, I work with individuals and their personal wealth management and one of the things that's important is that they have an insurance professional helping them understand risk areas and understand how to utilize these areas to help them. For a small business, it's much the same thing. In a worst case scenario, having a key person with life insurance can be a good idea, so if someone is killed in a disaster who is essential to the business, it can help the business continue to operate.

How much should I worry about including vendors in my plan?

Vendors can be just as important as employees. If there's a vendor that one's relying on to keep the business going and provide services, talk with them and see if they have a disaster plan in place. If they don't, that's an area of concern, and maybe you should look into backup vendors just in case.

I have a plan. Now what?

It's important to communicate it. Have training and regular updates to the plan and regular discussions with employees. If you put a plan in place and then wait five years, they may not remember it and there could be a lot of employee turnover by then. It's also a good idea to test the plan. You should also have an alternate meeting place in case the business itself is not a viable meeting place.

On the employee side, similar to the considerations at one's home, the key is to be thinking about safety in the workplace. Have medical supplies, disaster kits and the like readily available.

Any last advice?

I think it's good to remember that there are other kinds of peril that could be a result of an earthquake or not even related to an earthquake like water damage. These tips apply to other kinds of disaster like fire and floods. Freaky things can happen. The earthquake wasn't all about shaking, it was about fire and water and that sort of thing. Those are good things to go over with the insurance professional.